Staples cuts outlook and scales back expansion as profit disappoints

May 18, 2011

Framingham, Mass. -- Staples reported Wednesday that first-quarter profit rose 5% to $198.2 million, boosted by overseas strength and increased buying by small businesses in North America. Its results were softer than expected, and the company slashed its full-year earnings guidance and said it is scaling back on new store construction.

Revenue for the period ended April 30, rose 2% to $6.18 billion, from $6.06 billion a year ago. Same-store sales slipped 1%, mostly on a decline in Canadian retail customer traffic. International revenue climbed 4%, while North American retail revenue edged up 1%.

"Our first quarter results show that we're making good progress on our key growth initiatives and we're gaining share in North America, but at a cost to our bottom line," chairman and CEO Ron Sargent said in a statement.

The retailer now expects to open about 20 new U.S. stores and 10 new Canadian stores, while closing 10 stores, Reuters reported. This will give Staples 20 new stores in North America, about half of what was originally projected.

In addition, Staples is also in the process of "trimming significant square footage" from its current 18,000-sq.-ft. format, Sargent said. He also said the chain "plans to be aggressive in reducing the size of existing stores," as it has about 500 leases up for renewal over the next three years.

Despite missing estimates and scaling back its store plans, Staples reported better first-quarter sales overseas and increased buying by small businesses in North America.

International revenue climbed 4%, helped by strong performances from China and South America. North American retail revenue edged up 1%.

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